Diabetes is a leading cause of death in the U.S. and costs the U.S. an estimated $98 billion annually. According to American Diabetes Association, 30,000 Americans are diagnosed with Type l diabetes every year. One of the currently therapeutic options for Type I diabetic patients is islet cell transplantation. However the islet cell implantation is hampered by a lack of available islets and immune rejection. In vitro trans-differentiation of bone marrow-derived stem cells into insulin-producing islet cells may provide a virtually unlimited source for autologous islet cell transplantation for patients with Type I diabetes. Although it has been demonstrated that pancreatic ductal stem cells can differentiate into islet cells in vitro and reverse diabetes in a diabetic mouse model when implanted in vivo, it is extremely difficult, if not impossible to obtain the sufficient number of a patient's own pancreatic stem cells. For years, bone marrow has been shown to be a safe and effective source of adult stem cells. The high degree of plasticity of adult stem ceils shown by our preliminary studies and others provides the foundation for this proposal. In particular, we have demonstrated that rat hepatic oval "stem" cells can be induced to trans-differentiate into pancreatic islet-like insulin producing ceils in an in vitro system. Other investigators have shown that bone marrow-derived stem cells are capable of differentiating into phenotypically mature parenchymal cells of epithelial organs such as the liver. Here we hypothesize that under certain in vitro condition bone marrow derived stem cells are capable of being induced to differentiate into functional pancreatic islet-like insulin-producing precursor cells. The studies proposed in this application test the two critical steps: First, islet-like insulin-producing precursor cells derived from rat hepatic oval cells will be transplanted into diabetic animals to determine their ability to ameliorate the hyperglycemic state. Second, we will identify and isolate the bone marrow sub-populations capable of differentiating into functional islet-like insulin producing cells. The specific aims are as follows: Specific Aim I: To test the ability of oval cell-derived islet-like insulin producing precursor cells to reverse hyperglycemia in streptozotocin-induced diabetic NOD/SCID mice. Specific Aim II: To test the hypothesis that bone marrow-derived stem cells can be induced to trans-differentiate into functional pancreatic insulin-producing islet precursor cells in vitro. This study will lead to future proposal and the possibility of an unlimited source of autologous insulin producing islet-like cells for islet cell transplantation in type diabetic patients.